According to a recent article in InvestmentNews, a former executive of Securities America feared a “panicked run on the bank” for clients who held securities issued by Medical Capital Holdings Inc. On July 16, the SEC charged Medical Capital Holdings Inc. with fraud related to the sale of $77 million of private securities.
It appears that in July of 2008, W. Thomas Cross, who was then a senior vice president of the products distribution group at Securities America, sent an email to a Medical Capital official regarding a client having trouble redeeming shares of a Medial Capital offering. According to the article, Mr. Cross apparently wrote, “this is beyond alarming for us”‘. “Please see if you can find out what is going on and what we can do on behalf of our clients. I honestly fear a panicked run on the bank from Cedar Brook if what they seem to be saying is true.” (Cedar Brook is affiliated with Securities America).
According to Pratt H. Davis at Page Perry, the email sent by Mr. Cross clearly evidences that Securities America “was well aware of issues with the Medical Capital securities by July of 2008 and that it remains to be seen whether they were aware of the problems even prior to that date.”
Firms like Securities America who sold the Medical Capital offerings, states Mr. Davis, “could face liability on several fronts for selling the fraudulent securities” and that “it is clear that the firms selling these securities had a duty of due diligence to determine that the offerings, were in fact, what they were represented to be and to not misrepresent the safety of the investments if they knew or should have known of the problems with the securities.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing investors in cases involving Medical Capital securities. For further information, please contact us.